July 8, 2009

Asia Grain Outlook on Wednesday: US weather cues corn; soy focus China

Grain prices in Asia are likely to remain relatively weak in coming sessions, despite a moderate rebound during electronic trading at the Chicago Board of Trade in Asian hours Wednesday following declines across the board in the U.S. overnight.


CBOT corn prices have declined in recent sessions, led lower by a weakening outlook for crude oil, though the market will continue to also focus on weather developments in the U.S. corn belt through the remainder of July, which is considered a critical month for crops as pollination occurs during this time.


Heat and dry weather can hinder crop development, and is therefore seen as a bullish factor for corn prices; most observers said the U.S. crop is generally doing well.


Corn futures have weakened since last week's bearish U.S. Department of Agriculture acreage report, though underlying strong demand for corn could bolster the market, Deutsche Bank said in a quarterly commodities report issued this week.


The market may have overreacted to the USDA report, which projected U.S. corn acres at 87.035 million, up from 85.982 million acres planted last year - the second-highest total since 1946, Deutsche Bank said.


"Although this will raise corn production projections for the 2009-10 marketing year we believe underlying corn demand remains strong," the bank said. "We expect this will sustain global inventory-to-consumption ratios close to their lowest levels since the mid-1970s (and) therefore recommend a long corn versus short soy position."


At 0543 GMT e-CBOT's July corn contract was trading 2.60 U.S. cents higher at US$3.38 a bushel, after settling 7.75 cents lower Tuesday.



Soy focus on China buying, stockpiles


Soy futures also rebounded from a decline Tuesday - in Asian trading e-CBOT's July contract was up 7.00 cents at US$11.40 a bushel, having slumped 66 1/2 cents to a two-month low Tuesday.


The market will continue to focus on China's buying pattern and tight U.S. old crop stocks, Barclays Capital said in a commodities report also issued this week.


"A key near-term price driver for soy prices is likely to be any slackening in the pace of Chinese imports as well as any release of Chinese stockpiles, which will temporarily weigh on prices," Barcap said. "However, we would view old crop soy fundamentals at present as much more compelling when compared with the corn and wheat markets."



India wheat demand up; Japan cancels tender


India's wheat futures, which closed at a three-week high of INR1,098.60/100 kg Monday, are likely to continue finding support from improving demand following an announcement late last week that the country will allow the export of 900,000 tonnes of wheat and 650,000 tonnes of wheat products to March 2010.


India had imposed a ban on wheat exports since 2007.


Meanwhile, Japan's Ministry of Agriculture, Forestry and Fisheries isn't holding its regular wheat tender this week, a ministry official said Tuesday, declining to give reasons. The tender will resume next week, he said.

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